2381951
Effective December 31, 2020, I closed my sole proprietor business. For all of 2021, I have had no business income or any business expenses. For this year's filing on Turbotax, in my "Business Profile", I will indicate that I have Disposed of Business in Current Year: "Yes" (2021).
I have no inventory to dispose of however I do have some assets that I have been depreciating over the last few years. I will be keeping those assets (for now).
Will the above "Disposed of Business in Current Year" flag properly remove the assets from depreciation? Do I need to go in line by line and convert the assets to personal use or must I do something else?
Thanks.
You'll need to sign in or create an account to connect with an expert.
@Sat2021 wrote:
....Do I need to go in line by line and convert the assets to personal use.....?
Yes, and the program will guide you through this process. Read the screens carefully.
If you need to close a business schedule C, see this article on closing a business
https://turbotax.intuit.com/tax-tips/small-business-taxes/closing-a-business/L3pbEl8of
You can essentially forget the rest if you had neither income nor expenses for 2021, no inventory, and no employees. Simply ensure that you click the "Yes" button when you get to the Special Handling Required screen.
The three/four major things necessary for closing a SCH C business.
-End of Year inventory balance must be zero. This can be done by indicating all remaining inventory was removed from the business for personal use.
-All assets listed in the Business Assets section must be either sold or disposed of somehow by the business. It's common for unsold assets to be shown as "removed for personal use".
- If the business had any vehicle use for any year it was open, even if that business use was less than 100%, you must show the disposition of that vehicle. Typically this is done by showing the vehicle as removed from the business for personal use.
- Cash value of the business needs to be zero. This can be done by removing any remaining balance in the business as an "owner's draw". This may not be reflected on the tax return per-se. But the final draw from the business bank account to close that account would be shown on the books as an owner's draw.
Thank you for your feedback Carl. Since I have Zero Inventory, have had zero sales or expenses for physical year 2021, in the Business Profile section, I have marked "Yes" on the line "Disposed of Business in Current Year:." In the Business Assets section, reviewing the detail elections questions, marked NO to each question and flagged each asset line as converted to personal use effective 01/01/2021.
This should take care of my business asset question. Again, thanks for your help.
Steve
@Sat2021 wrote:Effective December 31, 2020, I closed my sole proprietor business.
For this year's filing on Turbotax, in my "Business Profile", I will indicate that I have Disposed of Business in Current Year: "Yes" (2021).
Will the above "Disposed of Business in Current Year" flag properly remove the assets from depreciation? Do I need to go in line by line and convert the assets to personal use
That needed to have been done on your 2020 tax return, not your 2021 tax return. You may need to amend to get things correctly done for 2020.
@AmeliesUncle is correct based on your original facts which indicated that you had no income OR expenses.
As a result of not doing this in 2020, which technically should have been the case, you need to make sure that your Sch C does reflect any depreciation as that would be incorrect.
Hopefully marking 1/1/2021 as you indicated, does not give you one day of depreciation. Just make sure it is zero.
Also, keep in mind that you step into the shoes of the assets tax basis, and upon sale, you will be required to report any depreciation recapture.
I didn't know I was not going to resume business until March of last year so I could not have done this in 2020.
I will be keeping the assets so not too worried about this.
Still have questions?
Questions are answered within a few hours on average.
Post a Question*Must create login to post
Ask questions and learn more about your taxes and finances.
alec-ditonto
New Member
alec-ditonto
New Member
logan10
New Member
RehbergW
New Member
DaltonY
New Member